2Q23 GDP: Well Above Expectations

Bottom Line:  The advance reading of 2nd Quarter 2023 GDP was well above expectations at 2.4% annualized quarter-on-quarter, led by gains in services consumption and nonresidential investment. Goods consumption rose only slightly, but government spending was higher. Trade was a slight drag, as was residential investment, while inventory growth was a slight positive. On net, this was a solid report, exemplified by solid gains in real final domestic demand and real final sales. Both rose slightly less than in the 1st Quarter but remained over 2%. Overall, initial indications suggest that 2Q growth was solid as consumers continued to transition from goods consumption during the pandemic back towards services. Moreover, despite the nearly flat growth in goods consumption, businesses continue to invest in long-term capital projects. Finally, residential investment was a modest drag but will likely flip to a positive in the 2nd half.